Chapter 9

Identify two ratios commonly used to assess a company's financial risk.

*Times interest earned ratio *Debt to equity ratio

Identify the characteristics of an annuity.

A series of amounts that are equal, Equal time periods between payment dates

Werner issues bonds at a discount. The related Discount account should be classified as a(n)

Contra Liability

Financing with ______ requires borrowing, whereas financing with ________requires issuing shares of stock.

Debit, Equity

is a contractual arrangement in which an owner provides a user the right to use an asset for a specified period of time.

Lease

Dorothea Inc. is selling all of its bonds to a large pension fund. This an example of a(n) ____Placement

Private

The debt to equity ratio is calculated as

Total Liabilities divided by Total Stockholders' Equity

Periodic payments on installment notes typically include (Select all that apply.)

a portion that reflects interest., a portion that reduces the outstanding loan balance

A series of equal amounts paid or received over equal time periods is called a(n)

annuity

The two types of financing are

debit, equity

A common reason for redeeming a bond prior to its maturity date is that

market interest rates decreased

When a corporation repurchases its bonds from the bondholders, the corporation___ the bond

retired

Corporate bonds most often pay interest

semiannually

The rate of interest printed on the face of a bond is referred to as the _____________ interest rate

stated

Callable bonds can be redeemed at the choice of

the bond issuer.

Convertible bonds allow the lender to convert each bond into:

common stock

The Discount on Bonds Payable account is classified as a(n)

contra-liability.

Which of the following are common characteristics or provisions of bonds?

convertible, secured/unsecured, callable,

Quattro Lending Company is considering lending a large sum to Eleance Inc. During its decision process, Quattro should especially consider Eleance's existing:

long-term liabilities

A contract in which an owner provides a user the right to use an asset in return for periodic cash payments over a period of time is called a(n)

Lease

bonds are supported by a specific asset the issuer pledges as collateral.

Secured Bond

If ABC Company receives $100,000 cash in exchange for issuing 100 bonds at their $1,000 face value, the transaction will be recorded with a

debit to Cash of $100,000 and a credit to Bonds payable of $100,000.

Neumann Corporation is planning to issues bonds with a face amount of $2 million. If Neumann's accountant, Betty, wants to calculate the expected issue she should calculate the ____ of the related future cash payments using the ____ interest rate.

Present value, market

Bonds that require payment of the full principle amount of the bond at the end of the loan term are referred to as

Term bonds

bonds are retired when the bondholder exchanges them for the issuing company's stock.

convertible